UK Pensions – Autumn Budget 2018

The Chancellor of the Exchequer, Philip Hammond, has presented the government’s Autumn Budget for 2018. Despite speculation that the government might change the pensions tax relief regime, the subject wasn’t raised. Instead, the pensions-related Budget announcements covered several ongoing initiatives:

  • Pension fund investment in patient capital: Autumn Budget 2017 announced an action plan to unlock £20 billion of finance for innovative high-growth firms, and established a taskforce to address the barriers to pension fund investment in patient capital. Patient capital involves the provision of long-term finance to high potential firms to enable them to reach their full potential. The Budget announces that:
    • > through the British Business Bank (the government’s UK-wide economic development bank), the government will support pension funds to invest in growing UK businesses. Several of the largest defined contribution (DC) pension providers in the UK have committed to work with the British Business Bank to explore options for pooled investment in patient capital;
    • > the Financial Conduct Authority (FCA) will publish a discussion paper by the end of 2018 to explore how effectively the UK’s existing fund regime enables investment in patient capital. This will accompany the ongoing work of HM Treasury’s Asset Management Taskforce to explore the feasibility of a new long-term asset fund;
    • > the Department for Work and Pensions (DWP) will consult in 2019 on the function of the pensions charge cap to ensure that it does not unduly restrict the use of performance fees within default funds, while maintaining member protections; and
    • > the FCA will consult by the end of 2018 on updating the permitted links framework to allow unit-linked pension funds to invest in an appropriate range of patient capital assets. The permitted links framework currently restricts the classes of assets that unit-linked funds may hold.
  • Banning pensions cold-calling: Alongside the Budget, the government has published a response to its consultation on banning pensions cold-calling and will shortly be implementing legislation to make pensions cold-calling illegal. Pensions cold-calling will be prohibited unless the caller is authorised by the FCA, or is the trustee or manager of an occupational or personal pension scheme, and:
    • > the recipient of the call consents to such calls being made by the caller on that line; or
    • > the recipient of the call has an existing client relationship with the caller, and the relationship is such that the recipient might reasonably envisage receiving pensions cold calls.
    • Pensions Dashboards: The government is taking steps to support the launch of Pensions Dashboards, which will allow individuals to see their pension pots, including their State Pension, in one place. The Budget confirms that the DWP will consult later this year on the detailed design for Pensions Dashboards, and on how an industry-led approach could harness innovation while protecting consumers.
    • Boosting pensions for the self-employed: This winter, the DWP will publish a paper setting out the government’s approach to increasing pension participation and savings persistency among the self-employed. This follows the 2017 review of auto-enrolment, and will focus on expanding evidence through a programme of targeted interventions and partnerships.
    • Lifetime allowance: The lifetime allowance will increase in line with CPI for 2019-20, rising to £1,055,000.

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